A new $63 million luxury hotel has opened in the historic Thresher Square complex in downtown Minneapolis where farm machinery was manufactured more than a century ago.

The Canopy by Hilton is the final piece of a $150 million redevelopment of a block sandwiched between the Mississippi River and the rapidly burgeoning neighborhood that has sprung up around U.S. Bank Stadium.

"I enjoy doing these types of projects where you can really change a neighborhood," said George Sherman, chief executive of Sherman Associates, as he gave a tour of the finished hotel, which is located on the corner of Park Avenue and S. 3rd Street.

The 183-room, full-service hotel opened Monday and offers more than 20 different room layouts with varying floor levels and ceiling heights (some as tall as 20 feet) thanks to the fact that Thresher Square is actually two buildings that were constructed side by side, one in 1900 (which is six stories) and the other in 1904 (which is seven stories).

Farm equipment such as threshers, which are used to remove seeds from stalks, was manufactured at Thresher Square until the 1980s, when it was converted into offices. Sherman bought the property in 2015 for $7 million. Ultimately, strong interest swayed him to turn Thresher Square into a hotel.

One of the first things guests will notice as they enter the hotel is the chunky wooden beams that frame the structure and open up to a large floor-to-ceiling atrium.

Jerry Holt

The lobby at the Canopy by Hilton at Thresher Square.

"You can't build this way anymore," said Shane LaFave, Sherman's director of multifamily development who helped lead the Thresher Square project.

The beams were examined for structural integrity and about 20 percent had to be replaced. Beams fashioned from Douglas fir had to be shipped in from the Pacific Northwest and lifted into place by crane. The beam replacement may have delayed the project a couple of months, but the heavy timber makes the property distinctive, Sherman said.

While earlier the lobby had been dark and cavelike, the development team added skylights to let much-needed light into the atrium.

The furnishings are made up of layers of warm colors and multiple fabrics that seem to capture the feeling of "hygge," (pronounced HUE-gah), a Danish word that symbolizes a type of cozy atmosphere that makes people feel content.

In the lower level, limestone and brick walls are exposed in a juxtaposition of sleek and modern meeting spaces and a sunken bar and cocktail area.

The DLR Group design firm was the architect for the project and Frana Cos. served as the construction contractor. Construction started in November 2017. Thresher Square is on the National Register of Historic Places and federal and state historic tax credits allowed the development to happen, Sherman said.

Umbra, the hotel's restaurant and bar which serves breakfast, lunch and dinner, offers patrons Minnesota staples — like walleye from the Red Lake Nation Fishery and cheese from Faribault — fused with French cuisine.

Sherman Associates also has a lease signed for a Denver-based restaurant scheduled to open in May in a 3,000-square-foot space on the ground level of the hotel along S. 3rd Street.

All of the buildings on Sherman's block, including the Old Spaghetti Factory building, which houses Sherman's offices, the new Trader Joe's and East End apartments, which is about 70 percent occupied since opening last summer, are connected through a shared underground parking garage.

Oversupply of new hotels?

Some developers are concerned that new hotels have flooded the market. One block from Thresher Square, the Ironclad, a mixed-use development that includes a 153-room hotel is scheduled to open in June. JR Hospitality and Hawkeye Hotels have about a dozen projects in the works across the area including a 203-room, dual-branded Hilton Tru and Home2 Suites. Still, the supply of hotel rooms increased 3.9 percent last year while demand increased 5 percent, according to a recent report by Cushman & Wakefield.

Sherman said Minneapolis remains a good hospitality market especially for business travelers.

"I think it's the newer hotels that are capturing the market," Sherman said.

The hotel's proximity to U.S. Bank Stadium and cultural venues like the Guthrie Theater are a large attraction. The hotel is sold out for the four days that the NCAA men's basketball Final Four will be in town during April.

Now that his redevelopment of the block is complete, Sherman said his company will announce another large addition in the area soon. Sherman Associates also has plans for a nearby mixed-use development with potentially an expanded Fire Station 1.

Nicole Norfleet covers commercial real estate along with professional services, including the Twin Cities' thriving marketing, accounting, and legal communities.

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